Paper11 Syl22 Dec23 Set2 Sol

INTERMEDIATE EXAMINATION SET - 2
MODEL ANSWERS TERM – DECEMBER 2023

PAPER – 11 SYLLABUS 2022
FINANCIAL MANAGEMENT AND BUSINESS DATA ANALYTICS
Time Allowed: 3 Hours Full Marks: 100
The figures in the margin on the right side indicate full marks.
SECTION – A
1. Multiple Choice Questions: [15 x 2 = 30]
(i) Efficient portfolios are those portfolios, which offer ______________ (for a given level of risk).
(a) Maximum return
(b) Minimum return
(c) Average return
(d) Positive return
(ii) Following is a widely used graph for data Visualisation:

(a) Bar chart
(b) Pie chart
(c) Histogram
(d) All of the above
(iii) Data represented in the form of picture is termed as ____________________.

(a) Graphic data
(b) Qualitative data
(c) Quantitative data
(d) All of the above
(iv) The primary benefit of data distribution is ___________________.

(a) the estimation of the probability of any certain observation within a sample space
(b) the estimation of the probability of any certain observation within a non-sample space
(c) the estimation of the probability of any certain observation within a population
(d) the estimation of the probability of any certain observation without a non-sample space
(v) What is the value of a levered firm L Ltd. if it has the same EBIT as an unlevered firm U Ltd.,
(with value of ₹ 700 lakh), has a debt of ₹200 lakh, tax rate is 35 % under M-M approach?
(a) ₹770 lakh
(b) ₹500 lakh
(c) ₹630 lakh
(d) ₹900 lakh
(vi) X Ltd. distributes its products to more than 500 retailers. The company’s collection period is
30 days and keeps its inventory for 20 days. The operating cycle would be ________________.
(a) 40 Days
(b) 43 Days
(c) 45 Days
(d) 50 Days
(vii) Higher FL is related the use of:

(a) Higher Equity
(b) Higher Debt
(c) Lower Debt
(d) Lower Equity
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Directorate of Studies, The Institute of Cost Accountants of India
(viii) According to Gordon’s Dividend Capitalisation Model, if the share price of a firm is ₹43, its
dividend payout ratio is 60%, cost of equity is 9%, ROI is 12% and the number of shares are
12,000, what will be the net profit of the firm?
(a) ₹15,480
(b) ₹23,220
(c) ₹36,120
(d) ₹54,180
(ix) A sound Capital Budgeting technique is based on:
(a) Cash Flows
(b) Accounting Profit
(c) Interest Rate on Borrowings
(d) Last Dividend Paid.
(x) Which of the following is not true with reference capital budgeting?
(a) Capital budgeting is related to asset replacement decisions
(b) Cost of capital is equal to minimum required return
(c) Existing investment in a project is not treated as sunk cost
(d) Timing of cash flows is relevant.
(xi) Minimum rate of return that a firm must earn in order to satisfy its investors, is also known
as:
(a) Average Return on Investment
(b) Weighted Average Cost of Capital
(c) Net Profit Ratio
(d) Average Cost of borrowing.
(xii) Short selling refers to ______________.
(a) Buying shares and then selling them on the same day
(b) Selling shares without owning them
(c) Selling some shares out of a large holding
(d) Continuously selling shares in lots
(xiii) Net Profit Ratio signifies:
(a) Operational Profitability
(b) Liquidity Position
(c) Big-term Solvency
(d) Profit for Lenders
(xiv) A firm has Capital of ₹10,00,000; Sales of ₹5,00,000; Gross Profit of ₹2,00,000 and Expenses
of ₹1,00,000. What is the Net Profit Ratio?
(a) 20%
(b) 50%
(c) 10%
(d) 40%.
(xv) In Inventory Turnover calculation, what is taken in the numerator?
(a) Sales
(b) Cost of Goods Sold
(c) Opening Stock
(d) Closing Stock.
Answer:
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv)
a d a a a d b c a c b b a a b
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SECTION – B
(Answer any five questions out of seven questions given. Each question carries 14 Marks.)
2. (a) List the different types of Money Market Instruments. [7]
(b) Enumerate the benefits of data analytics. [7]
Answer:
(a) Different types of Money Market Instruments:
Call Money:
Call/Notice money is an amount borrowed or lent on demand for a very short period. If the period
is more than one day and upto 14 days, it is called notice money and if the period is more than 14
days, it is called call money.
Treasury Bills:
Treasury bills are short-term instruments issued by the Reserve Bank on behalf of the government
to tide over short-term liquidity shortfalls. This instrument is used by the government to raise short-
term funds to bridge seasonal or temporary gaps between its receipts (revenue and capital) and
expenditure. They form the most important segment of the money market not only in India but all
over the world as well.
Commercial Bills:
The working capital requirement of business firms is provided by banks through cash-credits /
overdraft and purchase/discounting of commercial bills.
Commercial bill is a short term, negotiable, and self-liquidating instrument with low risk. It
enhances the liability to make payment in a fixed date when goods are bought on credit.
Commercial Paper:
Commercial paper (CP) is an unsecured short-term promissory note, negotiable and transferable by
endorsement and delivery with a fixed maturity period. It is issued only by large, well known,
creditworthy companies and is typically unsecured, issued at a discount on face value, and
redeemable at its face value. the aim of its issuance is to provide liquidity or finance company’s
investments, e.g., in inventory and accounts receivable.
Certificate of Deposits (CD):

CD is a negotiable money market instrument and issued in dematerialized form or as a usance
promissory note, for funds deposited at a Bank or other eligible Financial Institution for a specified
time period.
Repo, Reverse Repo:

Repo or ready forward contact is an instrument for borrowing funds by selling securities with an
agreement to repurchase the said securities on a mutually agreed future date at an agreed price which
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includes interest for the funds borrowed. Repo rate is the return earned on a repo transaction
expressed as an annual interest rate.
The Reverse of the repo transaction is called ‘reverse repo’ which is lending of funds against buying
of securities with an agreement to resell the said securities on a mutually agreed future date at an
agreed price which includes interest for the funds lent.
Promissory Notes and Government Securities:

Promissory Note is a written, dated and signed two-party instrument containing an unconditional
promise by the maker to pay a definite sum of money to a payee on demand or at a specified future
date.
A government security is a tradable instrument issued by the central government or the state
governments. It acknowledges the Government’s debt obligation. Such securities are short-term
(usually called treasury bills, with original maturities of less than one year) or long-term (usually
called Government bonds or dated securities with original maturity of one year or more).
(b) Benefits of data analytics:

Following are the benefits of data analytics:
(i) Improves decision making process
Companies can use the information gained from data analytics to base their decisions,
resulting in enhanced outcomes. Using data analytics significantly reduces the amount of
guesswork involved in preparing marketing plans, deciding what materials to produce, and
more. Using advanced data analytics technologies, you can continuously collect and analyse
new data to gain a deeper understanding of changing circumstances.
(ii) Increase in efficiency of operations
Data analytics assists firms in streamlining their processes, conserving resources, and
increasing their profitability. When firms have a better understanding of their audience’s
demands, they spend less time creating advertising that do not fulfil those needs.
(iii) Improved service to stakeholders
Data analytics gives organisations with a more in-depth understanding of their customers,
employees and other stake holders. This enables the company to tailor stakeholders’
experiences to their needs, provide more personalization, and build stronger relationships
with them.
3. (a) From the following details, prepare statement of proprietary Funds with as many details as
possible: [7]
a. Stock velocity 6
b. Capital Turnover ratio (on cost of sales) 2
c. Fixed Assets Turnover ratio (on cost of sales) 4
d. Debtors velocity 2 months
e. Gross profit turnover ratio 20%
f. Creditors velocity 73days
The gross profit was ₹60,000. Reserves and surplus amounts to ₹20,000. Closing stock was
₹5,000 in excess of opening stock.
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(b) Following information is available from the books of Standard Company Ltd. [7]
Particulars 2021 (₹) 2022 (₹)
Profit made during the year 2,50,000
Income received in advance 500 600
Prepaid expenses 1,600 1,400
Debtors 80,000 95,000
Bills Receivable 25,000 20,000
Creditors 45,000 40,000
Bills Payable 13,000 15,000
Outstanding expenses 2,500 2,000
Accrued Income 1,500 1,200
Calculate cash flow from operations.
Answer:
(a) Given Gross Profit = 60,000

G.P. Ratio = 20%
100
Sales = 60,000 × = 3,00,000
20
Cost of Sales = Sales – Gross Profit
= 3,00,000 – 60,000
= 2,40,000
Stock turnover given = 6

Cost of Sales
=
Average Stock
2,40,000
=
6
= 40,000
Average Stock = 40,000
Let x be the opening stock, then the closing stock will be x + 5000
x  (x  5000)
Then, Average Stock =
2
40,000 = x + 2500
x = 37500
Opening Stock = x = 37500
Closing Stock = x + 5000 = 37500 + 5000 = 42500
Debtors Velocity (Given) = 2 months
Sales  Debtors collection period 2
Debtors = = 3,00,000 × = 50,000
12 (No. of M onths) 12
Purchases + Opening Stock – Closing Stock = Cost of Sales
Purchases + 37500 – 42500 = 2,40,000
5
Purchases – 5000 = 2,40,000
Purchase = 2,45,000
Creditors Velocity (given) = 73 days
73
Creditors amount = 2,45,000 × = 49,000
365
FA Turnover given on Cost of Sales = 4
COS
=4
FA
2,40,000
=4
FA
2,40,000
FA =
4
FA = 60,000
Capital Turnover (Given) = 2

COS
=2
Capital
2,40,000
=2
Capital
2,40,000
Capital =
2
Capital = 1,20,000
Balance Sheet
Liabilities ` Assets `
Capital 1,20,000 Fixed Assets 60,000
Reserves & Surplus 20,000 Current Assets:
Creditors 49,000 Stores 42,500
Debtors 50,000
Cash (Bank B/F) 36,500
1,89,000 1,89,000
(b)
Profit made during the year 2,50,000
(+) Increase in Income received in Advance 100
(+) Decrease in Prepaid Expenses 200
(-) Increase in Debtors (15,000)
(+) Decrease in Bills Receivable 5,000
(-) Decrease in Creditors (5,000)
(+) Increase in Bills Payable 2,000
(-) Decrease in Outstanding Expenses (500)
(+) Decrease in Accrued Income 300 (12,900)
Net Cash from Operating Activities 2,37,100
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4. (a) The following data relate to some important items of a company disclosing its development
during the last five years: [7]
2018 (₹) 2022 (₹)
Working Capital 2,33,53,010 3,82,50,955
Plant and Equipment 99,78,420 2,41,76,835
Long – Term Debts 72,80,000 1,40,00,000
Net Tangible Assets 2,80,80,230 4,98,76,090
By computing the trend ratios, evaluate the changes in the financial position (soundness /
weakness) of the company.
(b) Calculate the weighted average cost of capital using (i) book value weights; and (ii) market
value weights based on the following information:
Book value structure: ₹
Debentures (₹100 per debenture) 8,00,000
Preference share (₹100 per share) 2,00,000
Equity shares (₹10 per share) 10,00,000
20,00,000
Recent market prices of all these securities are:

Debentures: ₹110 per debenture;
Preference share: ₹120 per share; and
Equity shares: ₹22 per share
External financing opportunities are:
a. ₹100 per debenture redeemable at par, 10 year maturity, 13% coupon rate, 4%
flotation cost and sale price ₹100;
b. ₹100 per preference share redeemable at par, 10 year maturity, 14% dividend rate, 5%
flotation cost and sale price ₹100; and
Equity share – ₹2 per share flotation costs and sale price ₹22 Dividend expected on equity
share at the end of the year is ₹2 per share; anticipated growth rate in dividend is 7%.
Company pays all its earnings in the form of dividends. Corporate tax rate is 50%. [7]
Answer:
(a) Computation of Trend Percentage

Particulars Absolute Changes Trend %
2018 2022
Working capital 1,48,97,945 100 163.8
Plant & Machinery 1,41,98,415 100 242.3
Long-term borrowings 67,20,000 100 192.31
Net Tangible assets 2,17,95,860 100 177.62
Interpretation of changes:
Trend percentage depicts that there is an increase of 142.3% in plant and machinery while an
increase in working capital is 63.79%. These trend percentages show that there is rapid increase in
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fixed assets. But if we see the changes in absolute figures of above said both items then just
opposite result comes before us.
Working capital is increased by `1,48,97,945 and plant and machinery is increased by

`1,41,98,415. On the basis of trend percentage, it can be said that finance has been provided from
long term borrowing and working capital for purchasing plant and machinery.
There is an increase of 92.31% and 77.6% respectively in long term debt and net tangible assets
which is undesirable because more increase in long term debts in comparison to net tangible assets
is the indicator of increasing debt burden.
(b) Cost for each source and WACC:
Debenture:
Coupon rate (Interest rate) = 13%
Interest = 13% × 100 = 13
RV = 100
NS = 100 – 4% floatation costs = 96
N = 10 years
T = 50%
RV  NS
Int (1 - T) 
N
Kd = × 100
RV  NS
( )
2
100  96
13 (1 - 0.5) 
10
= × 100
100  96
( )
2
6.5  0.4
= × 100
98
= 7.04%
Preference dividend = 14% × 100 = 14

NS = 100 – 5% Floatation Costs
= 95
Ddt = Nil
N = 10 Years
RV  NS
Pd (1 + Ddt)  ( )
Cost of Preference shares = Kp = N × 100
RV  NS
( )
2
100  95
14 (1 + 0)  ( )
10
= × 100
100  95
( )
2
8
14 + 0.5
= × 100 = 14.87%
97.5
D
1  100)
Ke = ( +g
P
0
D1 = 2
Growth rate = g = 7
P0 = 22 – 2 (floatation cost) = 20
D
1  100)
Ke = ( +g
P
0
2
= (  100) + 7%
20
= 17%
WACC based on Book Value Weights

Source Amount Weight Cost K0 = Weight × Cost
Debenture 8,00,000 8 7.04% 2.816
= 0.4
20
Preference Shares 2,00,000 2 14.87% 1.487
= 0.1
20
Equity Shares 10,00,000 10 17% 8.50
= 0.5
20
20,00,000 1.00 12.803
Source Amount Weight Cost K0 = W×C

Debenture 110 0.265 7.04% 1.8656
(8,00,000 × ) =8,80,000
100
Preference Shares 120 0.072 14.87% 1.07064
(2,00,000 × ) =2,40,000
100
Equity Shares 22 0.6626 17% 11.2642
(10,00,000 × ) =22,00,000
10
33,20,000 1.00 14.20
5. (a) Electromatic Excellers Ltd. specialise in the manufacture of novel transistors. They have
recently developed technology to design a new radio transistor capable of being used as an
emergency lamp also. They are quite confident of selling all the 8,000 units that they would
be making in a year. The capital equipment that would be required will cost ₹25 lakhs. It will
have an economic life of 4 years and no significant terminal salvage value.
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During each of the first four years promotional expenses are planned as under:
1st Year 1 2 3 4
Advertisement 1,00,000 75,000 60,000 30,000
Others 50,000 75,000 90,000 1,20,000
Variable cost of production and selling expenses: ₹250 per unit
Additional fixed operating costs incurred because of this new product are budgeted at ₹75,000
per year.
The company’s profit goals call for a discounted rate of return of 15% after taxes on
investments on new products. The income tax rate on an average works out to 40%. You can
assume that the straight line method of depreciation will be used for tax and reporting.
Assess the initial selling price per unit of the product that may be fixed for obtaining the
desired rate of return on investment. Present value of annuity of ₹1 received or paid in a steady
stream throughout 4 years in the future at 15% is 3.0079. [7]
(b) Assume a business that is considering a given project. Below are some selected data from the
discounted cash flow model created by the company’s financial analysts:
A project requires an initial investment of ₹1,91,315 and is expected to generate the following
net cash inflows:
Year 1 (2019): ₹95,000; Year 2 (2020): ₹80,000; Year 3 (2021): ₹60,000; Year 4 (2022):
₹55,000. Assess the discounted payback period of the project if the appropriate discount rate
for this project is 12%. [7]
Answer:
(a) Computation of selling price in order to get a return of 15%

Let ‘x’ be the selling price, then sales will be 8000x
Sales 8000x
Variable Cost [8000 × 250] 20,00,000
Contribution 8000x – 20,00,000
Fixed Cost [Adv. + Others] -1,50,000
Additional Fixed Cost -75,000
25,00,000 -6,25,000
Depreciation [ ]
4
8000x – 28,50,000
Tax @ 40% -3200x – 11,40,000
4800x – 17,10,000
(+) Depreciation 6,25,000
CIF 4800x – 10,85,000
CIF for a period of 4 years and the required return on investment is 15%
CUM CIF for Annuity factor @ 15% (given) = 3.0079

P.V. of CIF Disc @ 15% for 4 years must be atleast = 25,00,000
 3.0079 × (4800x – 10,85,000) = 25,00,000
10
14438x – 32,63,572 = 25,00,000
14438x = 25,00,000 + 32,63,572
14438x = 57,63,572
x = 399.19
Selling price must be at least ` 399.19= ` 400
(b) We can calculate the discounted payback period as follows:

Computation of DPBP
Period Cash Inflows Amount (` ) PVIF @ 12% Present Value (` ) Cumulative Present Value (` )
Year 1 (2019) 95,000 0.893 84,835 84,835
Year 2 (2020) 80,000 0.797 63,760 1,48,595
Year 3 (2021) 60,000 0.712 42,720 1,91,315
Year 4 (2022) 55,000 0.636 34,980 2,26,295
In this case, we see that the project’s payback period is 3 years.
6. (a) Q Ltd sells goods at a uniform rate of gross profit of 20% on sales including depreciation as
part of cost of production. Its annual figures are as under: [7]
₹
Sales (at 2 months credit) 24,00,000
Materials consumed (suppliers credit 2 months) 6,00,000
Wages paid (Monthly at the beginning of the subsequent month) 4,80,000
Manufacturing expenses (cash expenses are paid – one month in arrear) 6,00,000
Administration expenses (cash expenses are paid – one month in arrear) 1,50,000
Sales promotion expenses (paid quarterly in advance) 75,000
The company keeps one month stock each of raw materials and finished goods. A minimum
cash balance of ₹80,000 is always kept. The company wants to adopt a 10% safety margin in
the maintenance of Working Capital.
The company has no work-in-progress
Compute the requirements of Working Capital of the company on cash cost basis.
(b) X Ltd. buys its annual requirement of 36,000 units in six installments. Each unit cost ₹1 and
the ordering cost is ₹25. The inventory carrying cost is estimated at 20% of unit value. Find
the total annual cost of the existing inventory policy. Examine how much money can be saved
by using E.O.Q? [7]
Answer:
(a) Computation of working capital requirement:

W.N. – 1
Particulars `
Sales given 27,00,000
(-) G.P. @ 20% × 27,00,000 5,40,000
Cost of Production 21,60,000
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Expenses:
Particulars `
Material 6,75,000
Wages 5,40,000
Manufacturing expenses [60,000 × 12] 7,20,000
Cash expenses for cost of production 19,35,000
Depreciation = [21,60,000 – 19,35,000] 2,25,000
Cost of Production – Cash expenses 19,35,000

(+) Admn expenses 1,80,000
(+) Sales promotion exp. 90,000
Total Cash Cost 22,05,000
Computation of working capital on cash cost basis

W.N. – 1:
(i) Computation of Depreciation & cash cost
Particulars `
Sales 24,00,000
(-) Costs 6,00,000
Material Costs 4,80,000
Wages 6,00,000
Manufacturing expenses 16,80,000
GP before depreciation = 24,00,000 – 16,80,000 7,20,000
G.P. is given = 24,00,000 × 20% 4,80,000
Depreciation 2,40,000
(ii)
Particulars `
Cost of production – cash exp. (Other than Dep.) 16,80,000
(+) Admn expenses 1,50,000
(+) Sales promotion 75,000
Total Cash Cost 19,05,000
Computation of working capital:

Particulars `
Current Assets:
2 3,17,500
(i) Debtors [19,05,000 × ]
12
1 50,000
(ii) Raw Material [6,00,000 × ]
12
1 1,40,000
(iii) Finished Goods [16,80,000 × ]
12
12
1 18,750
(iv) Prepaid sales promotion [75,000 × ]
4
(v) Cash balance 80,000
6,06,250
2AO
(b) Economic Ordering Quantity =
C
Where,
A = Annual demand, O = Ordering Cost, C = Carrying Cost
2  36,000  ` 25
EOQ =
` 1  20%
18,00,000
EOQ = EOQ = 3,000 Units
` 1  20%
Particulars Existing Policy (` ) EOQ (` )
(i) Purchase Cost (36,000 × 1) 36,000 (36,000 × 1) 36,000
(ii) Ordering Cost [36,000 / 6,000 × 25] 150 [36,000 / 3,000 × 25] 300
(iii) Carrying Cost [1/2 × 6,000 × 1 × 20%] 600 [1/2 × 3,000 × 1 × 20%] 300
36,750 36,600
Saving by using EOQ = ` 36,750 – ` 36,600 = ` 150
7. (a) A Company pays a dividend of ₹2.00 per share with a growth rate of 7%. The risk free rate is
9% and the market rate of return is 13%. The Company has a beta factor of 1.50. However,
due to a decision of the Finance Manager, beta is likely to increase to 1.75.
Determine the present as well as the likely value of the share after the decision. [7]
(b) A firm’s sales, variable costs and fixed cost amount to ₹75 lakh, ₹42 lakh and ₹6 lakh
respectively. It hasborrowed ₹45 lakh at 9% and its equity capital totals ₹55 lakh.
(i) Calculate the firm’s ROI.
(ii) Does it have favorable financial leverage?
(iii) If the firm belongs to an industry whose asset turnover is 3, does it have high or low
asset leverage?
(iv) Compute the operating, financial and combined leverages of the firm.
(v) If the sales drop to ₹50 lakh what will the new EBIT be?
(vi) At what level will the EBT of the firm equal to zero? [7]
Answer:
(a) Computation of share price before and after the decision of the Finance Manager.
Before the finance manager’s decision:
We know that Ke = Rf + β(Rm - Rf)
Ke = 9% + 1.5 (13% - 9%)
= 9% + 1.5 (4%)
13
= 15%
Growth rate given (g) = 7%
D0 = ` 2
Expected Dividend D1 = 2(1+7%) = 2.14
D1 2.14
P0 = = = ` 26.75
K e - g 15% - 7%
After Finance Manager’s decision

Revised Ke = 9% + 1.75 (13% - 9%) = 9% + 1.75 (4%) = 16%
D 2.14
Revised Share Price = 1 = = ` 23.77
Ke - g 16% - 7%
(b) (i) ROI = EBIT/Investment

EBIT = Sales – VC – FC
= ` 75 lakh – ` 42 lakh – ` 6 lakh
= ` 27 lakh
ROI = ` 27 lakh / ` 100 lakh
= 27 %
(ii) Yes, the firm has favourable financial leverage as its ROI is higher than the interest on debt.
(iii) Asset turnover = Sales/Total Assets or Total Investments = ` 75 lakh/` 100 lakh = 0.75. It is
lower than the industry average.
Sales - Variable Costs ` 75 lakh - ` 42 lakh

(iv) Operating Leverage = = = 1.22
EBIT ` 27 lakh
EBIT ` 27 lakh
Financial Leverage = = = 1.18
EBIT - Interest ` 27 lakh - ` 4.05 lakh
Sales - VC ` 33 lakh
Combined Leverage = = = 1.44
EBIT - Interest ` 22,95,000
Alternatively, = OL × FL = 1.22 × 1.18 = 1.44
(v) EBIT at sales level of ` 50 lakh

Particulars Amount (`)
Sales revenue 50 Lakh
Less: Variable costs ( ` 50 lakh × 0.56) 28 Lakh
Less: Fixed costs 6 Lakh
EBIT 16 Lakh
(vi) Zero EBT implies Break-Even Sales (BESR) = FC/CV ratio, CV ratio = ` 33 lakh/` 75 lakh = 44%.
BESR = (` 6 lakh + ` 4.05 lakh)/0.44 = ` 22,84,091.
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Confirmation Table
Particulars Amount (`)
Sales revenue 22,84,091
Less: VC (0.56) 12,79,091
Less: FC (operating) 6,00,000
Less: Interest (additional fixed cost) 4,05,000
EBT ZERO
8. (a) “To make the data turn into user friendly information, it should go through six core steps” –
discuss. [7]
(b) Discuss the data classification process and steps involved in it. [7]
Answer:
(a) To make the data turn into user friendly information, it should go through six core steps:
1. Collection of data: The collection of data may be done with standardized systems in place.
Appropriate software and hardware may be used for this purpose. Appointment of trained
staff also plays an important role in collecting accurate and relevant data.
2. Organising the data: The raw data needs to be organized in an appropriate manner to generate
relevant information. The data may be grouped, arranged in a manner that create useful
information for the target user groups.
3. Data processing: At this step, data needs to be cleaned to remove the unnecessary elements.
If any data point is missing or not available, that also need to be addressed. The options
available for presentation format for the data also need to be decided.
4. Integration of data: Data integration is the process of combining data from various sources
into a single, unified form. This step includes creation of data network sources, a master
server and users accessing the data from master server. Data integration eventually enables
the analytics tools to produce effective, actionable business intelligence.
5. Data reporting: Data reporting stage involves translating the data into a consumable format
to make it accessible by the users. For example, for a business firm, they should be able to
provide summarized financial information e.g. revenue, net profit etc. The objective is, a
user, who wants to understand the financial position of the company should get the relevant
and accurate information.
6. Data utilization: At this ultimate step, data is being utilized to back corporate activities and
enhance operational efficiencies and productivity for the growth of business. This makes the
corporate decision making really ‘data driven’.
(b) Classifying data may be a difficult and laborious procedure. Automated systems can assist in
streamlining the process, but an organisation must determine the categories and criteria that will be
used to classify data, understand and define its objectives, outline the roles and responsibilities of
employees in maintaining proper data classification protocols, and implement security standards
that correspond with data categories and tags. This procedure will give an operational framework
15
to workers and third parties engaged in the storage, transfer, or retrieval of data, if carried out
appropriately.
Policies and procedures should be well-defined, respectful of security needs and the confidentiality
of data kinds, and simple enough for staff encouraging compliance to comprehend. For example,
each category should include information about the types of data included in the categorization,
security concerns including rules for accessing, transferring, and keeping data, and the potential
risks associated with a security policy breach.
Steps for effective data classification:

 Understanding the current setup: Taking a comprehensive look at the location of the
organisation’s current data and any applicable legislation is likely the best beginning point
for successfully classifying data. Before one classifies data, one must know what data he is
having.
 Creation of a data classification policy: Without adequate policy, maintaining compliance
with data protection standards in an organisation is practically difficult. Priority number one
should be the creation of a policy.
 Prioritize and organize data: Now that a data classification policy is in place, it is time to
categorise the data. Based on the sensitivity and privacy of the data, the optimal method to
be chosen for tagging it.
16

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INTERMEDIATE EXAMINATION SET - 2

MODEL ANSWERS TERM – DECEMBER 2023

(ii) Following is a widely used graph for data Visualisation:

(iii) Data represented in the form of picture is termed as ____________________.

(iv) The primary benefit of data distribution is ___________________.

(vii) Higher FL is related the use of:

2. (a) List the different types of Money Market Instruments. [7]

(b) Enumerate the benefits of data analytics. [7]

(a) Different types of Money Market Instruments:

Certificate of Deposits (CD):

Repo, Reverse Repo:

Promissory Notes and Government Securities:

(b) Benefits of data analytics:

(a) Given Gross Profit = 60,000

Stock turnover given = 6

Capital Turnover (Given) = 2

Recent market prices of all these securities are:

(a) Computation of Trend Percentage

Working capital is increased by `1,48,97,945 and plant and machinery is increased by

(b) Cost for each source and WACC:

Preference dividend = 14% × 100 = 14

WACC based on Book Value Weights

Source Amount Weight Cost K0 = W×C

(a) Computation of selling price in order to get a return of 15%

CUM CIF for Annuity factor @ 15% (given) = 3.0079

(b) We can calculate the discounted payback period as follows:

(a) Computation of working capital requirement:

Cost of Production – Cash expenses 19,35,000

Computation of working capital on cash cost basis

Computation of working capital:

After Finance Manager’s decision

(b) (i) ROI = EBIT/Investment

Sales - Variable Costs ` 75 lakh - ` 42 lakh

(v) EBIT at sales level of ` 50 lakh

Steps for effective data classification:

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